Monday, 24 June 2013

Labour's half turn to nowhere

Labour are making exactly the same mistake that the Tories made in 2007 when they said they would look at ways of sharing the proceeds of growth the same as Gordon Brown. By matching spending plans to the opposition you remove any wiggle room.

Of course, I think they are wrong for the opposite reason to where most Lefties think they are wrong. Not that they are ruling out spending more, but that by giving the Tories a stamp of approval for the current austerity programme which is not delivering any real terms cut to either deficit or debt.

Perhaps they think the voters are going to be encouraged that Labour can supply Tory toughness on budgets with Labour's supposed extra caring for the working class? They may well be right today. But today it is 2013 and not 2015.

In 2015 we will be in a very different economic place. The world and UK will either be int he next recession or teetering on it. This recession will not be a low-interest rate recession unless things have gone so wrong in the economy that everything is being felt purely in terms of a rapidly collapsing Pound with no interest rate rises to offset the real terms loss of purchasing power. This would be suggestive of high inflation...its hard to see how this will work.

It is most amusing politically to see Labour fall into the same trap as the Tories. If the Tories had stuck with their traditional messages of lower state spending then in 2010 they would have been a lot more credible. Similarly if Labour said nothing now and kept their powder dry for another year they would be in a much better position to decide what the policy for 2015-2020 needed to be. I can tell you its going to be an emergency period of quite distressing economic choices and impacts. Labour could say they will need to raise taxes and cut pensions (including early raising of the pension age) to defend welfare for all; but now they will have to do it from a position of weakness.

I'm not completely convinced it's utterly daft. They're triangulating to an empty church - it staves off the hacks and journos who will no doubt call them charlatans, spendthrifts and financially wreckless (of which charges apply and should be exposed) but in the hustings and for the next 2 years they can bullshit to high heaven.

I'm of the opinion that they've got it nailed on, that all at the moment is just mood music, that UKIP will break the northern marginals Labour and, frankly, that we're all completely snookered. But yeah, a strategic mistake but who cares about governing when there's campaigning to be done?

Osborne's "sharing the proceeds of growth" looks very silly now and of course in reality was very silly at the time because everyone knew that the growth was illusory. However it was a nice way of saying that over time the GDP share of state spending would fall. I think many C@W-readers would agree that a falling share for state spending is a good thing at a time when it approaches 50% of GDP.

Ed Balls looks sillier than George Osborne did in 2007 or whenever he made the sharing the proceeds speech. Balls has been saying since 2010 that the coalition's mistake is to cut too much and stall the economy by doing so.

I "cba" to read the detail of what EdM has said. Has he accepted, in advance, the coalition's upcoming spending review? If so, what is to stop the Tories ensuring (as they did in 1997 just before the election) that the review is exceptionally tough for the period after the election. If the Tories win they can carry it out. If Labour wins they will be in a very difficult position.

Harking back a couple of posts to your rather depressed future-gazing, I think the prospect of going bust "properly" will engage the minds of our "leaders" more than might be seen through their public pronouncements. Assuming (a big one) that nothing goes too pop too soon, I think the UK will find a way to squeeze the public sector and put it on a more sustainable path. The coalition have slowed the rise in public spending and made people realise that we cannot continue increasing public spending every year for ever. The next government or the one after that will manage to actually reduce spending, whoever wins the election, because it will have to, either because we Go French via Ed Balls or because the Tories will win in 2015 and have quite a free hand at sorting out the public sector.

Anon - Gilts are at 2 year highs today as equity markets give up all their gains for the year. Without QE, the cold reality of the economic situation in front of us is appearing.

BE - The post of Friday is my new meme, preparing for the next real crash. What the politicians do now is critical becuase as you rightly say, somethings can be done. Everything that is done now is a stich in time saves nine.I see the BIS today have launched a report that echoes what I said last week; all the time since 2009 has been wasted. China even is figuring out the need to try and stem its massive bubble....we are condemned to live in interesting times.

The present government is still spending, borrowing and printing money in order to keep the bloated public sector staggering along down the road, in the hope that it will reach the next election/junction before the oncoming juggernauts splatter it.

Collapse of sterling... hyper-inflation... default and national bankruptcy...

interesting to read ...''''' Labour are making exactly the same mistake that the Tories made in 2007 when they said they would look at ways of sharing the proceeds of growth the same as Gordon Brown. By matching spending plans to the opposition you remove any wiggle room.'''

i agree with the person who says that "" Ed Balls looks sillier than George Osborne did in 2007 or whenever he made the sharing the proceeds speech. Balls has been saying since 2010 that the coalition's mistake is to cut too much and stall the economy by doing so."""

this is completely true "" It is most amusing politically to see Labour fall into the same trap as the Tories. If the Tories had stuck with their traditional messages of lower state spending then in 2010 they would have been a lot more credible. Similarly if Labour said nothing now and kept their powder dry for another year they would be in a much better position to decide what the policy for 2015-2020 needed to be. ""

right to say that "" It is amusing to see Ed Milliband and Ed Balls over the weekend try and say they will rein in their spending tendencies.

Labour are making exactly the same mistake that the Tories made in 2007 when they said they would look at ways of sharing the proceeds of growth the same as Gordon Brown. By matching spending plans to the opposition you remove any wiggle room.""